RusalSays LME Warehouse Rule Changes are ‘Irrational’

By Joe Schneider -
Dec 24, 2013

The London Metal Exchange, the
world’s biggest market for industrial metals, made “irrational
and disproportionate” changes to its warehousing policy after
unfair consultation, United Co. Rusal said in a lawsuit,
according to Hong Kong Exchanges & Clearing Ltd. (388)

Rusal filed the suit in the English High Court yesterday,
seeking a judicial review, HKEx said in a statement. The bourse
said the complaint was without merit and it will defend the
proceedings. A copy of the filing wasn’t available. Rusal is the
world’s largest producer of aluminum.

The exchange, founded in 1877, changed the rules in a
notice on Nov. 7 in a bid to speed up withdrawals from
warehoused stockpiles of metal amid consumer complaints that
prompted scrutiny from U.S. regulators. Rusal also alleged the
consultation conducted by the LME prior to the changes was
“unfair and procedurally flawed”, HKEx said today.

“Implementation of the proposed changes to the warehousing
policy will proceed as announced,” the exchange said.

The amendments affect depots where waiting times to
withdraw stockpiled metals exceed 50 calendar days, according to
the LME notice. The bourse also said then it would review its
warehouse system every six months and was studying its powers to
regulate warehousing companies’ charges.

Consumers of metals including brewer MillerCoors LLC
complained that lengthy waits for stockpiled supplies inflated
costs. That spurred U.S. regulators to subpoena documents from
warehouse operators including a Goldman Sachs Group Inc. unit,
according to people with knowledge of the probe. The changes are
scheduled to take effect April 1.

High Inventories

Rusal urged the exchange to postpone the changes in a Sept.
25 statement, saying the new rules would reduce transparency and
further distort the aluminum market. The company’s press office
in Moscow confirmed in an e-mail it had filed a lawsuit.

Prices for aluminum, used in everything from beverage cans
to aircraft, slumped 15 percent in 2013, heading for the second
annual drop in three years. The metal fell to the lowest level
since 2009 this month. The contract for delivery in three months
rose 0.2 percent to $1,764 a ton on the LME today.